7 ms·

Hi, I'm Adam, I wrote this answer on Quora. Against my better judgement, I'm going to wade in here and make a couple of clarifying points. 1 - Scam. I regret u

Hi, I'm Adam, I wrote this answer on Quora. Against my better judgement, I'm going to wade in here and make a couple of clarifying points. 1 - Scam. I regret using the word "scam" in my answer, because I think it overshadows the broader point I was making about Bitcoin's severe structural design flaws. After watching the community react to this debate, I'm pretty confident that the average bitcoin supporter is not intentionally defrauding people. Consider my inflammatory rhetoric redacted and apologized for. 2 - Volatility. Since April 1, the average change (up or down) of the bitcoin/dollar exchange rate has been just under 8%. That's unprecedented. It's a clean order of magnitude more volatile than the stock market, which is considered a "volatile", "risky" class of asset. It's two orders of magnitude more volatile than a legitimate currency pair like the Dollar/Euro. Now, it's all fun and games while the exchange rate is basically trending up, but if that trend reverses look out below. 3 - Liquidity. All of that volatility comes on an average bitcoin volume of something like 20,000 per day. If I put in an order for $15,000 worth of Bitcoin right now, I'm pretty sure I could move the market between 5% and 10% to the upside. It's probably even worse to the downside. Call me a skeptic, but with that kind of easy price manipulation, I'm not quite ready to denominate my paycheck in Bitcoins quite yet. 4 - What It Means. A number of people criticized me for not understanding that Bitcoin is designed to be complementary to traditional currencies, and that analyzing it as an alternative is invalid. A number of different people criticized me for not understanding that Bitcoin is a different kind of currency, which will inevitably replace traditional fiat money, and that analyzing it as a component of the fiat currency system is invalid. The Bitcoin community is diverse, and no one really knows what this is supposed to be yet. That's totally fine with me. I can assure you I don't have any skin in this game. My money is in LinkedIn stock.* But I've studied world currencies extensively (and trust me, a normal currency debate is not this lively). So, I don't know what Bitcoin will end up as, but I know two things with certainty: a) that it's unstable as a currency b) that it's currently behaving as a speculative vehicle in an aggressive bubble * That was a joke

achompas 15y ago
Thanks for posting here and on Quora. As someone with an economics background, it's nice to hear a sane explanation based on fundamental theory. I'm just surprised people aren't considering Bitcoins from a supply-demand standpoint. Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government?
- thorax 15y ago
  > Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government? That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? There's also the hope that you can "hide" from corporations/bad-people and make transactions that don't require you to provide information that can be used for identity theft, marketing, etc. Just typing in a unique 1-time deposit number has a lot of appeal for stream-lining transactions and making people feel more comfortable performing electronic purchases. I'd love people to get addicted to that kind of high-privacy transaction and push more innovation for traditional currencies/startups to help with that. In the modern world, every purchase of anything not bought at a yard sale is a privacy and identity concern-- I'm eager to see alternatives that find new ways to avoid that.
  - achompas 15y ago
    That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? Yeah, I added that modifier after thinking some more. People are really interested in bitcoins as a "private" currency, and cash would accomplish the same thing. Large cash transactions raise flags, though. Still, bitcoins are a bad alternative to popular currency for a number of reasons Adam mentions. An e-currency without a finite supply would be an interesting exercise.
    - hazlitt 15y ago
      Money supply need not be infinite. Prices will adjust as demand for the unit arises. Essentially, you are doing the same as "creating" more units, without eroding peoples real savings. The entire system could thrive on one bitcoin.
      - achompas 15y ago
        Money supply needs to be a flow, instead of a stock, so that it can adapt efficiently to supply and demand and change with population and economic output. The entire system could thrive on one bitcoin. No, it couldn't. One bitcoin could not sustain a currency market, and a one-bitcoin market would value that bitcoin at highly variable prices.
rudiger 15y ago
Regarding your third point, the order book for the most popular Bitcoin exchange (Mt. Gox) is available [1]. Looking at the data, it seems there's actually quite a bit of liquidity bidding 7-10 USD and asking 10-13 USD per Bitcoin. It's only about 10,000 or 20,000 Bitcoin of depth on each side, so you can estimate the impact of buying or selling 15,000 USD worth of Bitcoin on the market. Of course, it might move less if you 1) consider using a dark pool of liquidity for a "large" trade, 2) add one or more limit orders to the order book (instead of using market orders), and 3) consider the fact that the order book gets "replenished" as trades come in. [1] http://mtgox.com/code/data/getDepth.php http://mtgox.com/code/data/getDepth.php
- antiscam 15y ago
  Unfortunately, Mt. Gox faces no regulation, so their data should be treated like the data from an offshore online poker company (many of which scammed users in underhanded ways even when they stood to gain significantly from their legitimate transaction fees). There would be almost no indication to the public until it were too late if Mt. Gox were actually directly a Ponzi scheme, even if the rest of the Bitcoin system were honest (which it is not). I'd also be afraid of having my assets frozen if I transferred money to and from Mt. Gox or the other exchanges. To use Britcoin, for example, you need to send and receive money from an individual developer -- that is, from his individual account. There's not necessarily protection for his transferees if it turns out that he, willingly or not, was engaging in money laundering. One additional thing that bothers me about the Bitcoin "community" at present is that they are engaged in an active and deceptive attempt to sanitize their public image. For example, in a Gawker story about drugs, Jeff Garzik, a core developer, inaccurately commented that Bitcoin could not be used to purchase anything anonymously. He surely knows that it wouldn't be difficult to do so; he appears simply to have been underplaying a regulatory risk that the currency faces in order to get part of the public on his side. Bitcoin == marketing. It has very good marketing on its side, even if the marketing is in some sense "open source" and communal. In that sense, it's very interesting sociologically. But it's, at core, a deception in practice.
DennisP 15y ago
I'm not sure you can start a new currency from scratch, and succeed, without extreme volatility. If it increased in value by a steady five percent a year it'd still be worthless in twenty years. The low volume is a function of it being new, not of it being a bad idea. Aside from that, I thought this was an excellent rebuttal: http://www.reddit.com/r/NonAustrianEconomics/comments/hputj/is_the_cryptocurrency_bitcoin_a_good_idea/c1xd0v9 http://www.reddit.com/r/NonAustrianEconomics/comments/hputj/...
beefman 15y ago
Hi Adam, I'm Carl Lumma. I usually upvote your posts on Quora but I didn't upvote this one because of "scam" and also because you gave more reasons than necessary. "Built-in deflation" is alone the reason bitcoin cannot work as a currency (at least, not without a prevailing currency to act as a 'heat sink'). This can be remedied of course by the practice of holding bitcoins on deposit in exchange for demand receipts, which can then be printed and sold without restricting the withdrawal of deposits. And I suspect that, with continued popularity, institutions will start doing this.
- acslater00 15y ago
  Fair enough.
- Gormo 15y ago
  Why is built-in deflation necessarily a problem? If the real economy continues to generate investment opportunities, wouldn't the deflation rate just supplement that? Sure, you could put money in your mattress for 5%, but if you can invest for a nominal 10% and thus yield a real 15%, why would you choose the mattress?
  - beefman 15y ago
    If this is an average loan, all 15% of its real return must be captured by deflation since the money supply cannot increase 10%. But then the mattress rate is also 15%. Of course some loans are better than average, and some are worse. The "deflationary spiral" takes out the worse ones first. That lowers the average and takes out the next tier, until the average is zero. Actually it goes below zero, to the average rate of real depreciation (e.g. termite damage to houses). Well, that's the bottom equilibrium anyway.
  - Iv 15y ago
    And also what is the difference between this scenario and a scenario where you can get a saving account that has a higher rate than inflation ?
thorax 15y ago
Thanks so very much for the clarification and the tempering of your response-- that "scam" wording was the only thing that gave me hesitation on whether you were objectively reviewing it from an economic standpoint. I'm pretty sure there are a lot of idealists behind it, but I haven't (yet) seen anyone excited about the currency that wanted to defraud anyone. Bitcoins are quite likely a mistaken long-term investment, but it doesn't seem like its proponents are trying to trick anyone about the core ideas. I'm just hopeful that it encourages more creativity in the space of private online transactions, digital currency advances, etc.
figomago 15y ago
I don't know why, but I'm suddenly remembering 1637, the Netherlands and some exotic tulip. Don't get me wrong, I think this is a wonderful technological breakthrough! But unless the flaws pointed out by the author are remedied, this will end in tears. Of course with bitcoins being the phenomenon they are right now, I don't expect many to agree with me :D
goebbels 15y ago
a) Have you even analyzed the source code to know whats going on? If not then you should just post directly to clientsfromhell so everyone can get a laugh at ignorant you are. What economic theories have you been studying that take into account for an infinitely divisible currency? b)Whats the dollar "supposed to be"? To your own admission your opinions are invalid and yet you continue to comment on bitcoins.
GrandMasterBirt 15y ago
I have a bigger issue with BitCoin. It was not mentioned in the response. Bitcoin is too volatile to use. Because USD is a set amount backed by the government, and because it de-values, I can do things like: Write a contract specifying a rate of pay for a job to the contractor lets say per hour. With bitcoin this is not possible. I cannot say "I will pay you 5 BTC/hr (50 USD now)" because once I say that, tomorrow that 5 BTS may be worth 100 USD. Now if the world suddenly and magically switched to BTC by tomorrow night as the only source of coinage, sure this will work. The exchange rate will be stable. However as Adam points out, this favors the early adopters. Yes mining helps the BTC network, however mining favors early adopters (sorry too late by now) who mined a shit ton of BTC and now have insane amount of money due to exchange rate. They just literally printed their own money and you bought it. So given the above what really happens is: I need to have a bank of bitcoins, and money must flow not sit for it to be valuable (extremely important, money sitting still is a commodity not currency). I need to be able to spend in BTC and buy in BTC. With that if all my assets are in BTC, me writing a 5 BTC/hr contract is perfectly fine. I don't care there is no conversion, everything is stable and 1 BTC is worth exactly 1 BTC. However that is not how the world for the next foreseeable future will be. There fore lets say I have 0 BTC and would like to buy an iPad. An iPad today is worth roughly 60 BTC give or take. So if I was to write get a contract for 5 BTC/hr I could earn myself an iPad in 12 hrs of work. To my employer (who also loves ipads) 5 BTC/hr is a scam. To him, today 12 hrs of work ~= 1 iPad. However because BTC is so volatile, tomorrow 6 hrs of work ~= 1 iPad. To him its against his interest to spend BTC because tomorrow it might get more valuable and be worth 3 hrs of work ~= 1 iPad. This will cause BTC to become a commodity not a currency. Fortunately this is a limited commodity, so its essentially becoming a new unregulated global commodity market. And of course those who are early adopters are the real winners. Also there is a security hole. While some will secure their BTC with insane encryptions and multi-factor authentication... not all do or will. Which means that you lose your bitcoin wallet, you are screwed. You get your computer hacked, you are screwed because your money just moved into someone else's hands. Unlike a bank, you cannot physically walk into a bitcoin office present your government papers (multiple forms of id) and get access to a lost wallet back. Encryption is irrelevant when simple phishing attacks can work just as well and since its a computer password, chances are that if you know one password for a person, you know his wallet's password. Now a couple of points: Just like the real market, there will be fraud everywhere. It is money after all. Just different kinds of fraud. However unlike the real market, the layman will not be able to get the same level of security as current banking. Sure its not 100% secure. Maybe not even 70%. But at least if you put 100k in the bank, you have a fairly good guarantee that your money will not suddenly dissappear. If it does you will have legal measures you can take to get it back. With BTC... you are fuuuucked. See the article about losing 8000 BTC. Sure it was not worth so much at the time, but it is irrelevant. The fact is that it may have been worth 100 dollars at the time and 80,000 today. The person lost his money on a technical glitch.
pbreit 15y ago
I don't necessarily disagree with your points nor think that Bitcoin will ever be much of a monetary force but most of your arguments simply have to do with Bitcoin being new. If everything was required to surmount your hurdles from the outset we'd never get anywhere.
vvpan 15y ago
I think that all we should do is wait and see. This is all very interesting and unpredictable. It is at least a good experiment. If you are going put money into the system, well it is at your own risk. Nobody who does not sign up is at any risk.
antiscam 15y ago
If you follow the Bitcoin forums carefully, it's actually not at all clear they aren't trying to defraud people. The behavioral patterns are very similar to a pump-and-dump scheme: many people have a large number of coins (usually acquired at a low price through early mining) and are aggressively and inaccurately promoting Bitcoins to people whose money they will be taking. Bitcoin as a technology has the potential in concept to be more than a scam, but the way it is being used appears, for all practical purposes, to be indistinguishable from a scam. Like Groupon, it gives people the appearance of a vested interest and turns them into marketers. Even if not a scam, your conclusion that it's currently entirely speculative is inescapable.
jshort 15y ago
There is a currency that has been created in an attempt to have a vehicle currency that is not tied to any one currency. With the US dollar being the vehicle currency of today it ties the US economy with the global economies must to tightly. It's finding a floating exchange rate that isn't closely tired to any one currency. As seen after Bretton-Woods global economies ties to one currency is not optimal. Creating this new currency is the hard part.
Portguy10 15y ago
What's the difference between the Bitcoin Concept if you leave out the computer algorithm solution to inflation and the unregulated exchanges that buy and sell their own created stock in privately held company's like Twitter and Facebook that has boomed in the last year or so? This will help me understand some of the concepts with this whole e-fiat money. Thanks.
billoreilllly 15y ago
I think everyone is missing the biggest factors here - faith and integration. The way something becomes currency, is that people believe it will still have value in the future, and it becomes widely accepted for goods and services. These are, by far, the two largest factors that could drive even a digital currency into use, by themselves. This is why Bitcoin is so risky - nobody knows if the general public (albeit the entire public) will eventually accept Bitcoins for their product. I'm pretty sure that if certain companies had not started accepting them as valid currency, the Bitcoin would already be worthless. But because companies, which are large groups of people, believed enough that the Bitcoin would be worth something between the time that it was received for a product and then spent again, Bitcoins survived and even increased in value. Since there is no way to know if people will want to use these other than to throw currency to the wall and see what sticks, it is extremely risky. I would NOT recommend anyone pay for Bitcoins with an already-tested currency such as cash or credit. If you are, however, interested in acquiring a few of these Bitcoins, try getting free ones for online services, such as "mining", completing surveys, answering captcha's, etc.

achompas 15y ago

Thanks for posting here and on Quora. As someone with an economics background, it's nice to hear a sane explanation based on fundamental theory. I'm just surprised people aren't considering Bitcoins from a supply-demand standpoint. Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government?

thorax 15y ago
> Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government? That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? There's also the hope that you can "hide" from corporations/bad-people and make transactions that don't require you to provide information that can be used for identity theft, marketing, etc. Just typing in a unique 1-time deposit number has a lot of appeal for stream-lining transactions and making people feel more comfortable performing electronic purchases. I'd love people to get addicted to that kind of high-privacy transaction and push more innovation for traditional currencies/startups to help with that. In the modern world, every purchase of anything not bought at a yard sale is a privacy and identity concern-- I'm eager to see alternatives that find new ways to avoid that.
- achompas 15y ago
  That's kind of odd to say-- couldn't you say the same thing about doing cash-only transactions? Yeah, I added that modifier after thinking some more. People are really interested in bitcoins as a "private" currency, and cash would accomplish the same thing. Large cash transactions raise flags, though. Still, bitcoins are a bad alternative to popular currency for a number of reasons Adam mentions. An e-currency without a finite supply would be an interesting exercise.
  - hazlitt 15y ago
    Money supply need not be infinite. Prices will adjust as demand for the unit arises. Essentially, you are doing the same as "creating" more units, without eroding peoples real savings. The entire system could thrive on one bitcoin.
    - achompas 15y ago
      Money supply needs to be a flow, instead of a stock, so that it can adapt efficiently to supply and demand and change with population and economic output. The entire system could thrive on one bitcoin. No, it couldn't. One bitcoin could not sustain a currency market, and a one-bitcoin market would value that bitcoin at highly variable prices.

rudiger 15y ago

Regarding your third point, the order book for the most popular Bitcoin exchange (Mt. Gox) is available [1]. Looking at the data, it seems there's actually quite a bit of liquidity bidding 7-10 USD and asking 10-13 USD per Bitcoin. It's only about 10,000 or 20,000 Bitcoin of depth on each side, so you can estimate the impact of buying or selling 15,000 USD worth of Bitcoin on the market. Of course, it might move less if you 1) consider using a dark pool of liquidity for a "large" trade, 2) add one or more limit orders to the order book (instead of using market orders), and 3) consider the fact that the order book gets "replenished" as trades come in. [1] http://mtgox.com/code/data/getDepth.php http://mtgox.com/code/data/getDepth.php

antiscam 15y ago
Unfortunately, Mt. Gox faces no regulation, so their data should be treated like the data from an offshore online poker company (many of which scammed users in underhanded ways even when they stood to gain significantly from their legitimate transaction fees). There would be almost no indication to the public until it were too late if Mt. Gox were actually directly a Ponzi scheme, even if the rest of the Bitcoin system were honest (which it is not). I'd also be afraid of having my assets frozen if I transferred money to and from Mt. Gox or the other exchanges. To use Britcoin, for example, you need to send and receive money from an individual developer -- that is, from his individual account. There's not necessarily protection for his transferees if it turns out that he, willingly or not, was engaging in money laundering. One additional thing that bothers me about the Bitcoin "community" at present is that they are engaged in an active and deceptive attempt to sanitize their public image. For example, in a Gawker story about drugs, Jeff Garzik, a core developer, inaccurately commented that Bitcoin could not be used to purchase anything anonymously. He surely knows that it wouldn't be difficult to do so; he appears simply to have been underplaying a regulatory risk that the currency faces in order to get part of the public on his side. Bitcoin == marketing. It has very good marketing on its side, even if the marketing is in some sense "open source" and communal. In that sense, it's very interesting sociologically. But it's, at core, a deception in practice.

DennisP 15y ago

I'm not sure you can start a new currency from scratch, and succeed, without extreme volatility. If it increased in value by a steady five percent a year it'd still be worthless in twenty years. The low volume is a function of it being new, not of it being a bad idea. Aside from that, I thought this was an excellent rebuttal: http://www.reddit.com/r/NonAustrianEconomics/comments/hputj/is_the_cryptocurrency_bitcoin_a_good_idea/c1xd0v9 http://www.reddit.com/r/NonAustrianEconomics/comments/hputj/...

beefman 15y ago

Hi Adam, I'm Carl Lumma. I usually upvote your posts on Quora but I didn't upvote this one because of "scam" and also because you gave more reasons than necessary. "Built-in deflation" is alone the reason bitcoin cannot work as a currency (at least, not without a prevailing currency to act as a 'heat sink'). This can be remedied of course by the practice of holding bitcoins on deposit in exchange for demand receipts, which can then be printed and sold without restricting the withdrawal of deposits. And I suspect that, with continued popularity, institutions will start doing this.

acslater00 15y ago
Fair enough.
Gormo 15y ago
Why is built-in deflation necessarily a problem? If the real economy continues to generate investment opportunities, wouldn't the deflation rate just supplement that? Sure, you could put money in your mattress for 5%, but if you can invest for a nominal 10% and thus yield a real 15%, why would you choose the mattress?
- beefman 15y ago
  If this is an average loan, all 15% of its real return must be captured by deflation since the money supply cannot increase 10%. But then the mattress rate is also 15%. Of course some loans are better than average, and some are worse. The "deflationary spiral" takes out the worse ones first. That lowers the average and takes out the next tier, until the average is zero. Actually it goes below zero, to the average rate of real depreciation (e.g. termite damage to houses). Well, that's the bottom equilibrium anyway.
- Iv 15y ago
  And also what is the difference between this scenario and a scenario where you can get a saving account that has a higher rate than inflation ?

thorax 15y ago

Thanks so very much for the clarification and the tempering of your response-- that "scam" wording was the only thing that gave me hesitation on whether you were objectively reviewing it from an economic standpoint. I'm pretty sure there are a lot of idealists behind it, but I haven't (yet) seen anyone excited about the currency that wanted to defraud anyone. Bitcoins are quite likely a mistaken long-term investment, but it doesn't seem like its proponents are trying to trick anyone about the core ideas. I'm just hopeful that it encourages more creativity in the space of private online transactions, digital currency advances, etc.

figomago 15y ago

I don't know why, but I'm suddenly remembering 1637, the Netherlands and some exotic tulip. Don't get me wrong, I think this is a wonderful technological breakthrough! But unless the flaws pointed out by the author are remedied, this will end in tears. Of course with bitcoins being the phenomenon they are right now, I don't expect many to agree with me :D

goebbels 15y ago

a) Have you even analyzed the source code to know whats going on? If not then you should just post directly to clientsfromhell so everyone can get a laugh at ignorant you are. What economic theories have you been studying that take into account for an infinitely divisible currency? b)Whats the dollar "supposed to be"? To your own admission your opinions are invalid and yet you continue to comment on bitcoins.

GrandMasterBirt 15y ago

I have a bigger issue with BitCoin. It was not mentioned in the response. Bitcoin is too volatile to use. Because USD is a set amount backed by the government, and because it de-values, I can do things like: Write a contract specifying a rate of pay for a job to the contractor lets say per hour. With bitcoin this is not possible. I cannot say "I will pay you 5 BTC/hr (50 USD now)" because once I say that, tomorrow that 5 BTS may be worth 100 USD. Now if the world suddenly and magically switched to BTC by tomorrow night as the only source of coinage, sure this will work. The exchange rate will be stable. However as Adam points out, this favors the early adopters. Yes mining helps the BTC network, however mining favors early adopters (sorry too late by now) who mined a shit ton of BTC and now have insane amount of money due to exchange rate. They just literally printed their own money and you bought it. So given the above what really happens is: I need to have a bank of bitcoins, and money must flow not sit for it to be valuable (extremely important, money sitting still is a commodity not currency). I need to be able to spend in BTC and buy in BTC. With that if all my assets are in BTC, me writing a 5 BTC/hr contract is perfectly fine. I don't care there is no conversion, everything is stable and 1 BTC is worth exactly 1 BTC. However that is not how the world for the next foreseeable future will be. There fore lets say I have 0 BTC and would like to buy an iPad. An iPad today is worth roughly 60 BTC give or take. So if I was to write get a contract for 5 BTC/hr I could earn myself an iPad in 12 hrs of work. To my employer (who also loves ipads) 5 BTC/hr is a scam. To him, today 12 hrs of work ~= 1 iPad. However because BTC is so volatile, tomorrow 6 hrs of work ~= 1 iPad. To him its against his interest to spend BTC because tomorrow it might get more valuable and be worth 3 hrs of work ~= 1 iPad. This will cause BTC to become a commodity not a currency. Fortunately this is a limited commodity, so its essentially becoming a new unregulated global commodity market. And of course those who are early adopters are the real winners. Also there is a security hole. While some will secure their BTC with insane encryptions and multi-factor authentication... not all do or will. Which means that you lose your bitcoin wallet, you are screwed. You get your computer hacked, you are screwed because your money just moved into someone else's hands. Unlike a bank, you cannot physically walk into a bitcoin office present your government papers (multiple forms of id) and get access to a lost wallet back. Encryption is irrelevant when simple phishing attacks can work just as well and since its a computer password, chances are that if you know one password for a person, you know his wallet's password. Now a couple of points: Just like the real market, there will be fraud everywhere. It is money after all. Just different kinds of fraud. However unlike the real market, the layman will not be able to get the same level of security as current banking. Sure its not 100% secure. Maybe not even 70%. But at least if you put 100k in the bank, you have a fairly good guarantee that your money will not suddenly dissappear. If it does you will have legal measures you can take to get it back. With BTC... you are fuuuucked. See the article about losing 8000 BTC. Sure it was not worth so much at the time, but it is irrelevant. The fact is that it may have been worth 100 dollars at the time and 80,000 today. The person lost his money on a technical glitch.

pbreit 15y ago

I don't necessarily disagree with your points nor think that Bitcoin will ever be much of a monetary force but most of your arguments simply have to do with Bitcoin being new. If everything was required to surmount your hurdles from the outset we'd never get anywhere.

vvpan 15y ago

I think that all we should do is wait and see. This is all very interesting and unpredictable. It is at least a good experiment. If you are going put money into the system, well it is at your own risk. Nobody who does not sign up is at any risk.

antiscam 15y ago

If you follow the Bitcoin forums carefully, it's actually not at all clear they aren't trying to defraud people. The behavioral patterns are very similar to a pump-and-dump scheme: many people have a large number of coins (usually acquired at a low price through early mining) and are aggressively and inaccurately promoting Bitcoins to people whose money they will be taking. Bitcoin as a technology has the potential in concept to be more than a scam, but the way it is being used appears, for all practical purposes, to be indistinguishable from a scam. Like Groupon, it gives people the appearance of a vested interest and turns them into marketers. Even if not a scam, your conclusion that it's currently entirely speculative is inescapable.

jshort 15y ago

There is a currency that has been created in an attempt to have a vehicle currency that is not tied to any one currency. With the US dollar being the vehicle currency of today it ties the US economy with the global economies must to tightly. It's finding a floating exchange rate that isn't closely tired to any one currency. As seen after Bretton-Woods global economies ties to one currency is not optimal. Creating this new currency is the hard part.

Portguy10 15y ago

What's the difference between the Bitcoin Concept if you leave out the computer algorithm solution to inflation and the unregulated exchanges that buy and sell their own created stock in privately held company's like Twitter and Facebook that has boomed in the last year or so? This will help me understand some of the concepts with this whole e-fiat money. Thanks.

billoreilllly 15y ago

I think everyone is missing the biggest factors here - faith and integration. The way something becomes currency, is that people believe it will still have value in the future, and it becomes widely accepted for goods and services. These are, by far, the two largest factors that could drive even a digital currency into use, by themselves. This is why Bitcoin is so risky - nobody knows if the general public (albeit the entire public) will eventually accept Bitcoins for their product. I'm pretty sure that if certain companies had not started accepting them as valid currency, the Bitcoin would already be worthless. But because companies, which are large groups of people, believed enough that the Bitcoin would be worth something between the time that it was received for a product and then spent again, Bitcoins survived and even increased in value. Since there is no way to know if people will want to use these other than to throw currency to the wall and see what sticks, it is extremely risky. I would NOT recommend anyone pay for Bitcoins with an already-tested currency such as cash or credit. If you are, however, interested in acquiring a few of these Bitcoins, try getting free ones for online services, such as "mining", completing surveys, answering captcha's, etc.